After some thirty years of wrestling with the cumbersome six-part test set forth in Davis & Sons, Inc. v. Gulf Oil Corp.,[1] for determining whether a contract to perform services related to oil & gas exploration on navigable waters is maritime, the Fifth Circuit took up In re Larry Doiron, Incorporated[2] earlier this year in an effort to streamline the test and bring clarity to an area of the law mired in uncertainty. Deciding that several of the factors were either redundant or unnecessary, the court carved away at Davis & Sons until it was left with a two prong test:
(1): Is the contract to provide services to facilitate drilling or production of oil and gas on navigable waters? and
(2) Does the contract provide or do the parties expect that a vessel will play a substantial role in the completion of the contract?
Recently, the court applied Doiron in the context of a contract to plug and abandon a series of offshore wells in Crescent Energy Services, L.L.C., v. Carrizo Oil & Gas, Inc.[3]
In Crescent, litigation ensued after Crescent’s employee suffered injuries while conducting P&A work on a platform. The Carrizo/Crescent MSA contained indemnity obligations that required Crescent to protect Carrizo from the employee’s claims. The enforceability of those indemnity obligations turned on whether maritime law or Louisiana law applied to the MSA.
Turning to the first prong of the Doiron test, the court needed to determine whether P&A work constituted “services to facilitate drilling or production.” Since plugging and abandoning a well is an integral part of the “life cycle” of a well, and successfully P&A’ing a well is a material obligation of any operator under Louisiana law, the court determined that P&A work does facilitate drilling or production. Next, the court confirmed that the work was performed on “navigable waters.” Crescent argued the prong was not met as its employee was actually on the platform when he sustained his injures, but the court rejected that argument, noting that while Davis & Sons would have inquired as to the employee’s location, Doiron did not. It was undisputed that the wells were in Louisiana waters, and the vessels used could navigate them.
Turning to the second test, the court noted that the specific work order for the P&A job called for the use of three vessels — a supply barge, a tug, and the spud barge OB 808. While vessels were obviously contemplated, Doiron requires that their use be “substantial,” and the court evaluated how the parties intended to use the vessels in the course of the work. Substantial, according to the court, must mean more than just transporting men and equipment from shore to the wellsite; the vessel must play a significant and intended role in the performance of the work, even if it is as a work platform. In Doiron, the contract was held not to be maritime, even though a vessel did play a significant role in the work in the end, because no vessel was intended to be used at the outset of the job. In contrast, the OB 808 provided by Crescent is a special purpose vessel that carries not only crew quarters, but also a crane and wireline unit to perform the P&A work. While Crescent’s employees would pass back and forth between the vessel and the platform in the course of their duties, the wireline unit remained on the OB 808 as there was no space on the small platform. Moreover, the parties expected the wireline work to constitute roughly half the P&A work, and the parties understood the OB 808 would be necessary to the completion of the work and that its involvement would be substantial.
With that, the court found that the Carrizo/Crescent MSA, coupled with the work order to perform P&A work, was a maritime contract.
Of significant note was the court’s discussion of Thurmond v. Delta Well Surveyors.[4] For decades, Fifth Circuit jurisprudence held that wireline work was non-maritime in nature, and the court used the opportunity in Crescent to declare that Thurmond and its progeny, which focused on whether services were “inherently maritime” rather than on whether work was to be performed from, or in connection with, a vessel, are no longer viable. In doing so, the Fifth Circuit is sending a signal that it intends to use Doiron to “clean house,” hopefully bringing more uniformity to the maritime contract determination.
[1] 919 f.2d 313 (5th Cir. 1990).
[2] 879 F.3d 568 (5th Cir 2018).
[3] 2018 WL 3420665 (5th Cir. July 13, 2018).
[4] 836 F.2d 952 (5th Cir. 1988).
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